Managing the Growing Risk of Environmental Liability
By Brendan Coffey
Disasters like last year’s Gulf of Mexico oil spill call attention to the catastrophic results pollution can have on business. Yet since such headline-drawing events are rare, businesses often underestimate the daily risks posed to their enterprise by more common environmental liabilities. Businesses across the spectrum of industry—from healthcare and agriculture to consumer products and contractors—face risk lying in wait everywhere, such as undiscovered legacy releases at facilities or yet-to-be-discovered complications with their products.
"Disasters are rare. The effects of a lot of smaller losses on businesses are much bigger," says David J. Dybdahl, president of American Risk Management Resources Network, an environmental risk consultancy, and an advisor to the EPA and the Department of Energy. "There has been a dramatic rise in the need for environmental insurance."
While corporate general liability insurance used to provide protection for environmental issues, it typically doesn’t any longer. As consumers and municipalities became more litigious over pollution issues in the 1970s, insurers excluded pollution from coverage, later extending exclusions to cover additional environmental issues. Recently, such exclusions have expanded to include essentially anything involving mold and bacteria. This means any damage or health claim where even the smallest amount of mold is found potentially can be denied under a typical general liability policy, placing real estate owners, contractors and corporate tenants at legal peril. It’s not an exaggeration to estimate that the number of companies now facing environmental risk due to the expansion of mold exclusions is up a hundredfold.
Many Options for Containing Environmental Risk
Fortunately, the scope of environmental insurance policies has broadened significantly in recent years while premiums have fallen, making finding proper environmental liability coverage easier and more affordable. While dozens of newcomers have rushed in to try to grab business, a handful of insurers experienced with environmental servicing are leading the way with flexible and creative solutions. Foremost among these is Chartis, which has written environmental liability coverage for 30 years, and serves more than 45 million clients in over 160 countries and jurisdictions with risk management solutions through its innovative products and services.
For today’s businesses, securing creative and forward-thinking coverage from an environmental risk specialist is essential. Just as the creation of Superfund in 1976 opened up companies to legacy pollution risk, new regulations put more companies in harm’s way, sometimes unintentionally. For example, a former property owner can be held responsible for the cleanup of the parcel long after they have sold it even if they played no part in the polluting. Given the multitude of similar pitfalls out there, "environmental insurance is simply underutilized by corporate America," says Dybdahl. As the EPA and states become more assertive in looking to hold corporations accountable for mistakes and omissions surrounding environmental events, business exposure to environmental liability promises only to increase.
Chartis: Innovative Environmental Insurance Solutions
The Environmental division of Chartis has pioneered flexible and creative environmental insurance coverage since 1981, bringing together the necessary resources to develop comprehensive environmental liability insurance solutions.
Introduced in 2010, the NextGen Protection℠ product suite provides insurance solutions tailored to specific industry classes. Whether the risk stems from what businesses produce, the services they provide or the facilities they operate, NextGen Protection is designed to provide complementary environmental insurance solutions. In the initial launch of NextGen Protection, customized coverages were crafted for particular industry classes and businesses such as healthcare facilities; higher education institutions; municipalities; commercial real estate owners and operators; fertilizer, pesticide and herbicide manufacturers; coatings, paint and sealant makers; waste management facilities; and household and personal products manufacturers. The NextGen Protection suite of products will be expanded to provide insurance solutions for the environmental liability risks of additional industry classes and businesses.
Regardless of the risk management plans companies have in place, unforeseen pollution-related events can still happen. Fortunately, the Environmental division of Chartis provides industry-leading service and access to specialized claims handling. No other insurance organization has assembled a larger dedicated pollution claims unit than Chartis, consisting of professionals focused on handling all types of environmental claims, from the complex to the everyday claim. And in the event of an environmental incident, policyholders have access to the 24-hour emergency Pollution Incident and Environmental Response (PIER) Program’s network of contractors to assist in providing a timely and appropriate response.
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